What is Patient Lifetime Value? (PLV part 1)
What is Patient Lifetime Value, exactly? Simply put, it is an estimate of the total money you receive for services for a patient (or client) during their lifetime.
The term is a bit off putting. How does “do no harm” align with viewing a patient in terms of dollars? It may not be as antithetical to care as insurance’s “medical loss ratio” but perhaps there are better words.
In healthcare, this money can come from more than the service receiver. Payment comes from the patient, life insurance services, governments, or loved ones. All of it should be factored in to patient lifetime value.
Healthcare marketing, especially in the private practice setting, is not just an art. It is a science.
Healthcare professionals are among the most STEM-literate business owners. And yet, too often, they do not apply the same scientific scrutiny to marketing as to their patients and clients.
That is understandable. After all, providing top quality care should remain the priority. And there is no shortage of things competing for a provider’s time.
If you are a healthcare provider and business owner, you probably know how much money appointments earn you. You may know how many appointments each patient makes per year. Perhaps you even know what percentage of patients return for a subsequent appointment.
But, do you know how much gross profit a patient provides over the entirety of your relationship? Or, whether you will make less money next year when you account for attrition? Do you know what you can spend on digital ads per patient before you lose money?
If not, you are missing a fundamental metric for your business’s health. Patient lifetime value answers these questions.
Jump to another section in this series: Finding Patient Lifetime Value
Why does patient lifetime value matter?
Forbes and Entrepreneur have called lifetime value the most important metric for your business. It allows you to forecast revenue, budget marketing, set pricing, and determine what people really think about your services.
If it is so important, why do you not know it already?
Because it is hard to determine — especially in healthcare. Calculating patient lifetime value requires that you know your revenue cycle KPIs. You must know your direct costs. You should also have several years of appointment data or reliable benchmarks.
Without knowing your patient lifetime value, you are gambling for success. You are guessing that your gross profit per appointment increases. You are assuming that your attrition decreases. You are hoping that your competitors do not know it, less they take your market share with more efficient advertising.
Yet, you cannot care for your patients if you are out of business. In fact, growing a healthy practice is one of the best ways to take care of your community. Patients and employees alike.
Patient Lifetime Value, in conjunction with Patient Acquisition Cost, is the crystal ball for your business. You will have a harder time sustaining their practice without it.
Follow this article series to calculate your Patient Lifetime Value. If you would prefer that we do it for you, just let us know.
The first step to find it is to calculate your Gross Profit per Appointment.